New TVA rate plan includes lower energy prices, grid access charge

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Dive Brief:

The Tennessee Valley Authority wants to restructure its wholesale electricity rates, lowering energy costs and adding a monthly grid access fee — a move the federal utility says is needed to "improve the alignment of wholesale rates with their underlying costs."

While the proposals are designed to be revenue-neutral for the utility, in an analysis of the changes TVA said that each alternative has the potential to increase monthly bills for "a majority of residential customers."

Dive Insight:

TVA's proposal reflects a recent trend of utility attempts to increased fixed charges on customers. According to the North Carolina Clean Energy Technology Center, U.S. utilities petitioned regulators for fixed charge increases about 80 times in 2017, up from about 70 in 2016, and 60 in 2015.

Utilities like TVA these changes are necessary to reflect their infrastructure costs, which are more fixed than variable. But consumer advocates and distributed energy providers say they reduce the benefit of installing solar panels and decrease customer control over bills.

Stephen Smith, executive director for the Southern Alliance for Clean Energy, told the Times Free Press, "TVA has never had a grid access charge for wholesale power in its history and it makes no sense to add one now."

But according to TVA, current energy prices "over-incentivize consumer installation of DER, leading to
uneconomic results for the people of the Valley as a whole."

The utility is forecasting flat or declining load over the next decade, meaning there is "little need for new energy sources. At the same time, consumer interest in renewable energy continues to rise."

TVA wants to revise the structure of wholesale electric power rates, to "better align wholesale rates with the underlying costs" to serve the 154 local power companies who distribute power throughout TVA’s service territory. The utility is taking comments on the proposal through April 9.

TVA's 82-page draft environmental assessment considers three changes to the rate structure. The utility's preference is to reduce energy charges by about $0.01/kWh and make up that lost revenue in grid access fees. But it also considered other changes, including a smaller, quarter-of-a-cent decrease to energy prices, and a larger $0.025/kWh decrease.

Broadly, the changes would impact two groups. The first is wholesale standard service, which includes residential and small business customers served by local utilities.

The proposal would also impact larger commercial and manufacturing customers with power demands over 5 MW, served either through a local distribution company or directly by TVA.

The two smaller proposed decreases to energy prices would result in the average consumer experiencing a $1 increase to their monthly electricity bill, TVA estimates. The maximum increase in a consumer’s monthly bill would be "small," the utility said, "generally no more than $2."

The $0.01/kWh and $0.02/kWh proposed decreases "would likely have the beneficial effect of lowering households’ bills in months of high usage," TVA said, helping to stabilize bills.

The Times Free Press estimated fixed fees would make up about 12% of residential energy bills under the proposed changes.

The utility also said it expects a mix of minor and positive impacts across the range of its proposed changes.

"Each alternative has the potential to slightly increase the monthly bill for a majority of residential customers," TVA said. Under the 1-cent and 2.5-cent proposals, "high-usage households would likely see a decrease of more than 1.5% in their average monthly bills while low-usage households would likely see a small increase in their average monthly bills."

Customers who do not use much electricity would see their bills increase more than other households as a proportion of household income, the analysis concluded.

TVA also said it wants to rebalance the hydro allocation credits distributed to residential consumers with the hydro allocation debits collected from nonresidential consumers, to reflect recent declines in commercial and industrial sales.

TVA is owned by the federal government and provides electricity for customers and local power companies serving 9 million people in parts of seven southeastern states. President Trump's proposal to sell the utility, along with the Bonneville Power Administration, has received little support.